Moody’s Slaps New Jersey With 9th Consecutive Credit Downgrade

640px-New_Jersey_State_House

Moody’s on Thursday downgraded New Jersey’s credit rating by one notch, which marks the ninth time since 2010 a major rating agency has taken such an action.

Pension costs were cited as a factor behind the decision; but in the report, Moody’s makes it clear that New Jersey only hurt itself by slashing its pension contribution in 2014 and 2015 — the action helped Christie balance the budget in the short-term, but will exacerbate the state’s structural imbalance going forward.

From the Asbury Park Press:

Moody’s said it downgraded New Jersey’s bond rating because the state’s weak financial position isn’t improving, though it said the state’s budget performance, economy and liquidity have seen some stabilization. It said the state budget’s large structural imbalance is primarily related to continued shortfalls in the state’s pension contribution.

[…]

“The negative outlook reflects our expectation that the state’s financial and pension position will weaken further before pension reform, if successful, is implemented,” Moody’s said in a report issued Thursday night. “Without meaningful structural changes to the state’s budget, such as pension reform that dramatically improves pension affordability, the state’s structural imbalance will continue to grow, and the state’s rating will continue to fall.”

[…]

Each of Wall Street’s three major rating agencies have now lowered their assessment of New Jersey’s fiscal health three times since Gov. Chris Christie took office, more than any other New Jersey governor. The downgrades don’t have an immediate impact on state finances but can mean it will cost more for the state to borrow money by selling bonds.

The outlook on New Jersey’s credit rating remains “negative”, which means further downgrades are possible if the state stays its course.

The state has the second-worst credit rating of any state in the country, second only to Illinois.

 

Photo credit: “New Jersey State House” by Marion Touvel. Licensed under Public domain via Wikimedia Commons – http://commons.wikimedia.org/wiki/File:New_Jersey_State_House.jpg#mediaviewer/File:New_Jersey_State_House.jpg

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